ACES is crippling oil industry

Posted: Thursday, March 10, 2011

By Jeff Kinneeveauk

The State of Alaska faces a critical challenge. Alaska's Clear and Equitable Share (ACES) tax regime is severely crippling Alaska's oil and gas industry. This imperils much needed jobs for Alaskans at a time when our nation's economy is the weakest it has been in decades.

The oil and gas industry has created thousands of jobs for Alaskan residents, and the industry provides significant funding for meaningful programs. ASRC Energy Services benefits directly from the industry's presence in the state, as do many other businesses across all sectors of Alaska's economy. It is important to note that the Trans-Alaska Pipeline fuels 89 percent of the money Alaska has for education, public safety, roads, state programs -- and the Permanent Fund. Without a viable oil and gas industry or a robust economy, Alaskans will suffer.

If legislators do not move quickly, Alaska will lose its economic bedrock. The facts are clear: since ACES passed in 2007, the number of rigs on the North Slope and the production of oil from Alaska has steadily declined, despite record oil prices.

In stark contrast, during this same period, the rig count and oil production in the lower 48 has significantly increased. The reason for this growth is no secret. When the price of oil rises, the industry's investments, jobs, and production should similarly rise. In Alaska, this just isn't happening.

Now is the time for our legislators to reverse Alaska's decline. Alaska must not be left behind as the rest of the nation grows domestic oil and gas resources to spur job creation and to meet increasing energy demands.

To keep Alaska competitive, legislators must reform ACES. Consider the tax structures of other states: Wyoming offers a 6 percent severance tax, Texas 4.6 percent, and North Dakota 11.5 percent. In contrast, ACES starts at 25 percent and can rise to two and three times that rate.

Alaska simply cannot compete on these terms, and the real losers in this equation will be Alaskan employees and businesses.

Not only are we losing out to the Lower 48, but we are losing out globally. Alaska falls behind competitors like Canada, the United Kingdom and Brazil. In fact, Alaska ranks in the bottom 10 percent in one study comparing the fiscal competitiveness of numerous global jurisdictions. Alaska residents deserve far better.

Reforming ACES could lead to sustainable long-term gains in jobs and investments in the state. This is critical for all Alaskans -- for each of our families, friends, neighbors and colleagues.

We must get this message to Juneau. We cannot stand by and watch the line continue to decline. That is why ASRC Energy Services is running a series of ads highlighting the urgent need to reform ACES. Please join us in this campaign to grow Alaskan jobs by writing to members of the Alaska State Legislature. Together, let's demand that our legislators act NOW on responsible ACES reform.

Jeff Kinneeveauk is president and CEO of ASRC Energy Services Inc., the largest, Alaska-based oil and gas service company in the state, and a wholly-owned subsidiary of the Arctic Slope Regional Corporation.